While many ordinary events are cancelled due to COVID-19, one regular summer occurrence continues:
Three faculty members join the QED for Fall 2020.
We are profiling their backgrounds and research programs online.
Nahim Zahur travels up I-81 from Cornell where he is completing his PhD.
Traffic and Productivity
When you’re stuck in traffic for so long in the mornings, it sort of has a huge effect on the rest of your day.
Nahim Zahur knows a thing or two about traffic jams. Growing up in Dhaka – the Bangladeshi capital and one of the world’s most densely crowded and polluted cities – Zahur couldn’t help but wonder how all those cars and trucks stuck idling in traffic affected the people inside them, not to mention the city’s notoriously poor air quality.
Today, as an economist, Zahur is quantifying some of the casual observations he made as a young man. For example, it’s no secret to economists or city planners that snarled traffic in cities like Toronto and Los Angeles comes with huge costs to productivity. But, in an ongoing project that analyzes credit- and debit-card use and plots it against traffic congestion patterns in Beijing, China,
Zahur is shedding light on how clogged roads affect the other side of the coin: consumption. According to his data, a 10% increase in travel time is a disincentive for shoppers that translates to a same-day decrease in consumption of 2.4%. Interestingly, the dampening effect of traffic on spending is particularly noticeable in the morning.
Between 2011 and 2014, Zahur worked as a research associate at a think tank in Singapore called the Energy Studies Institute, where he researched energy and environmental policy issues. There, he developed a particular interest in understanding the relationships between corporate decision-making and government policy in global energy markets.
More recently, while pursuing his PhD in Economics at Cornell University, he delved further into this area by studying the pros and cons of long-term contracts for liquid natural gas (LNG). LNG is a booming global business dependent on giant ocean tankers and gigantic coastal terminals where the natural gas is piped in from its source, liquefied, and loaded onto the ships for export.
Interestingly, instead of being sold on the spot market – which is how the majority of oil is traded – roughly 75% of LNG sales happen through long-term contracts that can bind buyers and sellers together for up to 30 years. Zahur wondered: why would a firm choose to lock itself into an arrangement that would restrict its ability to respond quickly to fluctuating demand for natural gas?
After collecting detailed data on LNG contracts, investment, trade flows, and spot prices, Zahur crafted a quantitative economic model that provided some answers. Yes, long-term contracts put a stranglehold on a firm’s flexibility, and the economic cost of this is considerable. On the other hand, constructing those LNG export terminals is a billion-dollar proposition, and energy companies need to ensure they have steady and reliable buyers before they build one. Long-term contracts provide them with peace of mind that they’ll be able to recoup their investment. Without these contracts, Zahur has found, global investment in LNG infrastructure would shrink by around 35%.
... even though no economic theory can attempt to capture all of this complexity, we can still make a lot of progress in understanding how the economy works using these simplified theoretical models
When he formally begins his new role as an assistant professor in the QED this fall, Zahur plans to continue this work and related research on the Chinese shipbuilding industry and the effects of airborne pollution on consumer spending in Beijing.
He’s also keen to teach and mentor graduate students, which he feels is integral to his role as an academic. His goal is to both share his enthusiasm for economics as a tool (or a set of tools) that provides a way to analyze and understand human behaviour, and to instill critical thinking skills that will help students understand why and how the real world, in all its messy, complicated glory, doesn’t always behave in the way that even the best economic theories predict it should.
“What I like to emphasize in my teaching is that even though no economic theory can attempt to capture all of this complexity, we can still make a lot of progress in understanding how the economy works using these simplified theoretical models," he says. “This, of course, requires thinking about economic theories critically, and understanding when they work well and when they do not.”